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Realty slump hits Trikona Capital, to be wound up

The slump in the real estate market has caused investors in the £250 million Trikona Capital, the India real estate fund of Trikona Trinity Capital, to demand that its fund managers “dispose of all its assets in an orderly fashion”. Trikona Trinity Capital is listed on the Alternative Investment Market (AIM) on the London Stock Exchange.

This is the first time foreign hedge fund investors have asked managers of a real estate fund to exit Indian investments. A couple of months ago, KSK Emerging Indian Energy Fund had to be wound up after shareholders, which included large hedge funds, demanded that the company be liquidated and the money invested by them returned.

Sources close to the Trikona Capital development said some of its limited partners, including hedge funds QVT financial and Carrousel Capital, with 27 per cent and 14.3 stakes, respectively, proposed a resolution for “an accelerated disposal of all assets”.

The company passed this resolution in an extraordinary general meeting (EGM) on Tuesday. The resolution also authorised the board to buy up to 70 per cent shares through a buyback or a tender offer.

Some projects in which Trikona invested were stalled for lack of sanctions and approvals, which delayed returns to the cash-strapped investors.

“Some shareholders had liquidity problems. As managers, we had to agree to their demands. However, any haste in disposing of these investments will mean a breach of the government of India’s rules,” said Ashish Kalra, chief executive officer, Trikona Capital.

According to a recent Foreign Investment Promotion Board notification, foreign investors in Indian real estate cannot sell their stake to another foreign investor for three years.

Trikona Capital fully invested the £250 million in India within 12 months of raising it. The group has made 17 investments in India. Some of these include Tech Oasis, Greater Noida (around 215.5 crore), Rustomjee Township in Mumbai (around Rs 79 crore) and Fortis Healthcare (around Rs 100 crore)

“Apart from demanding disposal of all assets, these limited partners sought the removal of some fund managers,” said the source. After the EGM, two directors — Rak Chugh, founder and managing director, and Andrzej Sobczak, non-executive director and chief operating officer of Carrousel Capital — stepped down.

The EGM also approved resolutions to change the investment policy and the distribution of capital. One resolution said that if the company’s ordinary shares traded below the net asset value (NAV), the shareholders would be returned the capital through cash. Trikona Trinity Capital is currently trading at £31.25.